(report producer/analyst: Minsheng Securities Zhou Chaoze Xu Rui )
1 is a world-class pharmaceutical equipment leading domestic enterprise
domestic pharmaceutical equipment leading enterprise, committed to becoming a world-class pharmaceutical overall solution supplier.
Dongfulong was founded in 1993. It is an integrated pharmaceutical equipment service provider that provides overall solutions for pharmaceutical processes, core equipment and system engineering for global pharmaceutical companies.
When it was established, the company focused on the research and development of freeze-drying systems. It has the leading domestic R&D and design capabilities in the field of freeze-drying systems, and continues to expand its product line. It has comprehensive layout in the fields of engineering, equipment and consumables. It has five major equipment production bases with global competitiveness. It has gradually established R&D and design centers overseas, and is committed to becoming an international first-class overall pharmaceutical solution supplier.
.1 Dongfulong has a clear equity structure, a comprehensive biotechnology business layout
The company's equity structure is clear, the actual controller is the chairman Zheng Xiaodong holds 41.25% of the shares, Zheng Keqing is a father-daughter relationship and is a joint actor. After 2014, Dongfulong established and acquired several subsidiaries to lay out the front-end of the biopharmaceutical process, including Dongfulong Bioreagents focusing on culture medium products, Qianzhu Bio and Vladivostok in the direction of fillers and chromatography filtration, Dongfulong medical packaging material in the biological reaction bag, and Saip filtration in the direction of ultrafiltration membrane in the direction of package.
Company's product line is diversified, covering the fields of instruments and equipment and consumables, and creating a one-stop service platform for biopharmaceuticals.
Dongfulong is committed to building pharmaceutical system solutions and developing in all directions in the fields of equipment and consumables and engineering.
company provides pharmaceutical companies with customized overall solutions and pharmaceutical system equipment; from raw material equipment (chemical drug synthesis, Chinese medicine extraction, biological stock solution) to preparation equipment (injection, oral solid preparation), it is widely used in the fields of drug manufacturing such as biological products, vaccines, blood products, antibiotics, chemical drugs, diagnostic preparations, health products, veterinary drugs, and Western Chinese medicine.
In addition, the company has built Dongfulong Medical Technology in the form of industrial investment, focusing on the research and development of front-end technologies in the pharmaceutical and medical industries. In the field of cell therapy, it provides an overall solution for the preparation and production of immune cells , stem cell , tumor cell vaccines, etc.
The company's revenue has grown steadily and its gross profit margin has rebounded rapidly. After went public in 2011, its revenue side maintained steady growth. After 2018, the company's gross profit margin showed a rebound trend, and starting from 2019, the company's revenue side achieved rapid year-on-year growth.
The company's business structure continues to change, and the proportion of bioengineering has increased rapidly. Dongfulong continues to expand its layout and product line, transitioning from freeze-dryer stand-alone to lyophilized system, enriching raw materials, injection single machine, oral solid preparation single machine, and systems, purification engineering equipment and other sectors, and achieving alternating growth. After 2019, bioengineering and consumables became the main driving force for the performance growth of major companies.
.2 The front-end layout of biopharmaceuticals is focused on making efforts in the high-end market
The company's revenue structure continues to change, expanding from the core freeze-dried business to the direction of bioengineering. Since 2016, the company has continued to increase its efforts in the field of bioengineering, and in line with the trend of the era of biopharmaceuticals, it has successively expanded its product lines in the direction of bioreactor , ultrafiltration chromatography, cell culture equipment and consumables, and gradually expanded from the back end of the production chain to the front end.
Company released a 3.2 billion yuan private placement project in April 2022, with a total investment of approximately 3.6 billion yuan.
This project plans to carry out the overall construction of the biopharmaceutical equipment industry trial production center and the construction of the complex preparation core equipment production line in Minhang District, Shanghai. The industrial trial production center focuses on cutting-edge technology development, new product research and development, and the upgrading and iteration of core products and information upgrading. By establishing and upgrading the bioengineering trial production center, injection agent trial production center, solid preparation trial production center, etc., the company will comprehensively enhance the company's continuous innovation ability and understanding of pharmaceutical processes, meet the market's demand for new products and new technologies, and provide solid process reserves and technical accumulation for the company's future development. The core equipment production line of
complex preparations has expanded, that is, the production of complex preparation liquid dispensing systems will increase the company's production capacity in the preparation equipment of complex preparation equipment such as microspheres, liposomes, and drug-loaded fat emulsions.
complex preparation core equipment production line planned production capacity is 157 sets of liquid distribution systems per year. The liquid distribution system belongs to the company's pharmaceutical equipment sector, and its business categories are injection single machines and systems. This project is implemented by the company and has a construction period of 36 months.
Company 22Q1 Construction projects, contract liabilities, inventory, and accounts receivable have all increased significantly, and ROE has increased significantly.
After the tide of orders related to the new crown epidemic, many indicators such as contract liabilities, inventory, and accounts receivable showed significant growth in 22Q1, demonstrating the strong growth potential of performance. The company's contract liabilities in Q1 in 222 years increased significantly year-on-year, reflecting the company's performance potential.
2 Biopharmaceuticals has developed rapidly, and upstream industries are rising high
.1 Biopharmaceutical production chain is long, has high barriers, fast iteration, and has weak periodicity
Biopharmaceutical equipment and consumables have high barriers, a large market, and a low domestic production rate.
Biopharmaceuticals can be divided into upstream cell culture and downstream isolation and purification. Compared with traditional drug preparation, the biopharmaceutical production chain is longer, the production process is complex, and the technical barriers are higher. At present, the upstream and downstream are still in the period of rapid iteration of the production process, and the product upgrades are faster.
one-time use system shows a rapid growth trend on the market.
Single-use System (SUS), also known as Single-use Technology (SUT), is an advanced biopharmaceutical process solution, usually formed by welding and assembly of polymeric material components to form a system or production unit, which can be used for single or phased pharmaceutical research and development or production activities.
Currently, SUT covers multiple links such as cell culture, cell purification, biological reaction, stock solution storage, drug solution transportation, finished product packaging, etc., involving a series of consumables for polymer materials such as biological reaction bags, fillers, and membrane materials.
The widespread application of one-time use system is mainly due to the advantages of one-time use system in both construction and operation.
In terms of factory construction, the one-time use system has been adopted by more and more biopharmaceutical companies because of its short construction cycle, few production equipment, low initial investment cost, and convenient equipment combination. It is the first choice for its new products and new production lines. In terms of operation, the one-time use system can greatly reduce investment in cleaning and disinfection (or sterilization), shorten the production cycle of , increase flexibility, and maximize the meeting of drug regulatory departments in various countries' continuously increasing requirements for pharmaceutical companies to reduce cross-contamination.
disposable reactor has stronger consumable properties than stainless steel reactors.
In recent years, one-time technology has been widely used in the biopharmaceutical industry due to its low pollution risk, low cleaning and verification costs. It not only brings innovative equipment to biopharmaceutical companies, but also helps pharmaceutical companies to greatly shorten construction and production time, but also brings greater flexibility to it.
At present, the disposable reactor has been successfully used in mammalian cell , insect cell culture, and microbial fermentation. The types of drugs involved include antibodies, vaccines, recombinant proteins, cell therapy, recombinant blood products, etc. The application stages involved cover R&D, clinical and large-scale commercial production.
disposable bioreactor has a rich product line and good amplification. It can not only complete batch culture, feed batch (flow-added) culture, and perfusion culture, but also use micro reactors to perform high-throughput screening experiments.
.2 The biopharmaceutical industry is booming, opening a new era of upstream
Biopharmaceutical has become the mainstream direction of pharmaceutical development in the 21st century, and cell culture is the main technology. 2021 The sales of biopharmaceuticals account for a large proportion of drugs. Despite being disturbed by COVID-19, the FDA’s Center for Drug Evaluation and Research (CDER) approved 53 new therapies in 2020, the second highest total ever, just slightly below the all-time high of 59 varieties in 2018 and the same as the 1996 approval number.
cell culture technology occupies a mainstream position in modern biomedical technology. 1995-2011, among all biomedicines approved by EMA, the proportion of cell culture technology production reached 78.3%. Large-scale cell bioreactors are the core production equipment of biopharmaceutical industry . Cell culture, ultrafiltration chromatography, purification process related consumables and reagents constitute the entire process solution of biopharmaceuticals.
According to statistics data, the global upstream market for biopharmaceutical equipment consumables will be approximately US$5.9 billion in 2019, and the compound growth rate is predicted to be 12.8% from 2019 to 2027. Based on this, we estimate that the global upstream market will be approximately US$7.5 billion in 2021, and the functional coverage of culture medium preparation and cell culture; according to grand view research statistics, the global downstream market will be approximately US$26.6 billion in 2021, and the compound growth rate is expected to be 15% from 2022 to 2030, and the functional coverage will be cell separation, solid-liquid separation, chromatography purification, refined ultrafiltration, etc. Therefore, based on the above estimates, the global global market size of biopharmaceutical equipment and consumables in 2021 will be approximately US$34.1 billion.
There is still a lot of room for improvement in domestic biopharmaceutical production capacity. In May 2021, the global total biopharmaceutical production capacity was about 17.4 million liters, and the main production capacity is still concentrated in Europe, the United States and Japan, with a total of about 13 million liters. China's biopharmaceutical production capacity was about 1.8 million liters. Compared with the 870,000 liters in 2018, there is still a significant gap compared with Europe and the United States.
.3 From a global perspective, the CGT industry is booming, and the new track is expected to reconstruct the upstream pattern
CGT industry is in the early stage of development, and its rapid development and application provide upstream suppliers with opportunities to overtake.
Global CGT-related production capacity accounts for about 1% of biopharmaceutical production capacity. The industry is in the early stage of rapid growth, and funds continue to flow into cells and gene therapy (CGT). In 2021, CGT received $24 billion in cash and investment, including $1.6 billion in advance cash and partner equity, and $6.7 billion in venture capital.
The value of authorized transactions, mergers and acquisitions, venture capital and IPOs has been rising over the past five years. As downstream projects are approved for clinical and marketed, it is expected to increase rapidly, the CGT track can provide domestic companies with opportunities to overtake and participate in the new round of global biopharmaceutical production capacity construction.
.4 The trend of continuous production process increases the upstream and downstream integration requirements for suppliers
Continuous process has significant advantages in capacity management and cost control, and at the same time improves the overall solution capabilities requirements for suppliers. In traditional batch production processes, materials are collected uniformly after each step of operation, and then the next step is performed. Generally, there is a storage and detection process of intermediate in the middle.
continuous production process has smaller equipment space and higher production efficiency. With the increase in cell line expression units and the increase in reactor scale, continuous production processes are becoming increasingly important to meet the equipment needs caused by site and capital requirements. The continuous production process corresponds to the traditional batch production process, which highly integrates multiple operating equipment units, continuously inputs raw materials into the system, and continuously stable outputs of final products, so there are higher requirements for the integration of equipment and systems.
is based on the production scale of 2000L, and the use of continuous flow process filler is reduced by 60%, the use of Buffer is reduced by 40%, and the labor cost is reduced by 33%.
According to the company's industry data, the global continuous bioprocess market will grow from US$6.7 billion in 2019 to US$12.1 billion by the end of 2025, with a CAGR of approximately 10.4%.
.5 The industry's high prosperity continues to see the high growth of overseas leaders, and mergers and acquisitions accelerate product iteration and upgrades and coverage
Satolis As an overseas giant of biotechnology solutions, the order quantity and revenue volume in 2021 maintained a growth rate of about 50% year-on-year.
Based on the good integration of upstream and downstream processes, the company expanded its product portfolio in 2021 through two acquisitions, mainly targeting cell therapy and gene therapy: CellGenix produces cell culture components, such as growth factor , cytokine and GMP-quality culture media for the production of cell and gene therapy products; Xell develops and produces culture media and feed supplements for cell culture, especially viral vector for gene therapy and vaccines.
Satolis will deepen cooperation with waters to promote the digitalization and automation of bioprocesses in 2021. Waters's bioprocess analyzer based on mass spectrometry technology will be combined with Sartorius multi-parallel bioreactor system, allowing specific analytical steps in drug discovery and cell line development to be directly carried out in a production environment, such as online measurements, so these steps do not need to be outsourced to external laboratories for sample testing.
3 The company's bioengineering business leads growth, and the internationalization road begins a new journey
.1 The company achieves full coverage in the bioprocess system solution sector
Bioprocess system solutions cover the entire field of biopharmaceuticals. The company has the ability to complete biological process solutions in the fields of vaccines, monoclonal antibodies, blood products, recombinant proteins, etc., and has opened upstream and downstream through the acquisition of subsidiaries such as Vladivostok, Qianchun Biologics, and Saip Filtration, forming a full process coverage of upstream expression and downstream purification. The products include bioreactors, chromatography , filtered fillers and consumables, and promote continuous production and overall solution supply.
.2 The front-end layout of biopharmaceuticals, M&A support M+E+C strategy
improves the production chain layout and is committed to becoming an overall solution provider of biopharmaceuticals.
downstream purification is the main reflection of technical barriers and production costs in the biopharmaceutical link, and it is also the fastest iteration link. The advantages of
downstream process solutions establish the competitiveness of upstream suppliers and are the key to affecting the production efficiency and costs of downstream pharmaceutical companies.
2021 The company accelerates the expansion of its front-end business, acquires Qianchun Biotechnology and Vladivostok, and implements downstream solution layout capabilities.
Qianzhu Bio is a high-tech enterprise focusing on biomacromolecular purification media and purification technology, with independent research and development and production capabilities. It has a complete product line of biomacromolecular chromatography media. Its main products include Purose and Rigose series agarose gel media and other gel media, covering technical application fields such as ion exchange chromatography , mixing mode chromatography, hydrophobic chromatography, affinity chromatography , gel filtration chromatography and other technical services, providing companies and R&D institutions in the field of biopharmaceuticals, supporting chromatography column , and separation and purification process development.
Vladivostok has the first batch of fully automatic purification equipment research and development, sales and service teams in China. The products include digital chromatography systems, chromatography columns, ultrafiltration, hollow fibers, etc., and have customized equipment capabilities.
Dongfulong integrates resources and provides a one-time use system (SUS) solution.
Single Use System (SUS), also known as Single Use Technologies (SUT), is an advanced biopharmaceutical process solution, usually formed by welding and assembly of polymeric material components to form a system or production unit, which can be used for single or phased pharmaceutical research and development or production activities.
Currently, SUT covers multiple links such as cell culture, cell purification, biological reaction, stock solution storage, drug solution transportation, and finished product aliquots.
.3 Internationalization, digital intelligence , automation development, promote the pharmaceutical industry 4.0 pharmaceutical system
digital intelligence development catches the world's first-class level. The company has joined hands with Dingjie Software and others to develop towards the goal of "automation, intelligence, and digitalization".
Dongfulong uses digital software to plan the factory layout and production line design, and conduct virtual planning simulation and optimization verification of workshop processes to realize workshop layout optimization, material distribution optimization, manual and equipment quantity optimization, save manufacturing costs, shorten development cycles, and reduce product production scrapping rate.
Biopharmaceutical System Equipment Industrial Intelligent Production Workshop integrates with the original erp (enterprise resource planning system), barcode system, EPM ( comprehensive budget management system), OA (office automation system) and other systems of the enterprise through the introduction of mes (manufacturing execution management system), plm (product life cycle management system), crm (customer relationship management system), and pms (project management system). In terms of equipment management, the simulation analyzes the utilization of equipment and the production capacity of the production workshop, and clarifies the production bottlenecks and some underutilized production space. The process management and equipment management of the
mes system greatly improve production efficiency and management level, with the utilization rate of the site increased by more than 30%; the equipment resource allocation of the production workshop has been optimized to a certain extent, and the utilization rate of existing equipment has been increased by about 10%. The capacity utilization rate of the entire workshop has been greatly improved, with the comprehensive utilization rate reaching more than 85%.
.4 The internationalization strategy is accelerated, and the COVID-19 pandemic provides a window period
The company is actively developing overseas markets, and the COVID-19 pandemic window period is accelerating the pace.
The company's overseas revenue volume achieved relatively high growth in 21 years, of which the European region's revenue was 729 million yuan, an increase of about 150% year-on-year, and the Asian region's revenue was 298 million yuan, an increase of about 60% year-on-year. Overseas revenue accounted for 24.5%, an increase of about 6.8% year-on-year.
After the outbreak of the overseas epidemic, the company seized the window period for overseas production capacity transfer, entered the European supply chain and strengthened the company's brand strength in Europe. These include the Swiss Recipharm of the world's top ten CDMO companies, providing them with core equipment for mRNA vaccine production. As the company's second largest export customer, Russia is expected to continue to provide an incremental market.
Company actively explores overseas markets, and the pace is accelerated during the COVID-19 window period.
Dongfulong accelerates the pace of overseas market development and adds 6 new subsidiaries in Asia and Africa in 2021. The company has hundreds of overseas offices, and has achieved coverage in many countries in Asia, Europe and the United States. It is expected that the company will accelerate the increase in the proportion of overseas revenue in the next few years.
4 Profit forecast and valuation
.1 Profit forecast assumption and business split
We expect that in Dongfulong's original freeze-drying equipment and system business stability, the company is expected to benefit from the continued high prosperity of the biopharmaceutical industry in the field of bioengineering and consumables growth, smoothing the cyclical nature of the pharmaceutical equipment industry, and making efforts to achieve stable performance growth in the bioengineering sector.
1) Injection stand-alone and system businesses have declined after the epidemic. is expected to maintain a stable growth of 10% from 2022 to 2024, with corresponding revenues of 1.52 billion yuan, 1.67 billion yuan, and 1.84 billion yuan, respectively.
We expect gross profit margin may slightly lower with the decline in demand for COVID-19 , and will be 45%, 44% and 43% respectively from 2022 to 2024.
2) Bioengineering stand-alone and system: 's bioengineering sector benefited from the high prosperity of biopharmaceuticals and the acceleration of domestic substitution process. We expect the year-on-year growth rate to be about 65% under the low base in 2022, and it is expected that the growth rate will slow down in 2023 and 2024, with year-on-year growth rates of 26.67% and 26.32% respectively. The corresponding revenue is 1.50 billion, 1.90 billion yuan, and 2.40 billion yuan respectively. We expect gross profit margin to slowly increase with the scale effect, with the corresponding gross profit margins from 2022 to 2024 to be 48%, 48% and 50% respectively.
3) Medical equipment and consumables: company is the first to achieve the increase in domestic cell products based on the high prosperity of the downstream CGT industry, including disposable reaction bags, culture medium, etc. It is expected that the year-on-year growth rate in 2022-2024 will be 60.3%, 62.5%, and 53.9% respectively under the low base, with corresponding revenues of 8.0, 1.30, and 2.00 billion yuan respectively. We expect the gross profit margin of the sector to remain at 70% from 2022 to 2024.
4) Purification Projects and Equipment: The growth rate of is comparable to the industry growth rate. We expect that 2022-2024 will continue to maintain a year-on-year growth rate of 20% from a high base, with corresponding revenues of 670 million yuan, 800 million yuan and 960 million yuan respectively, and the gross profit margin is expected to remain stable at 14%.
5) Food Equipment: We conservatively expect food equipment to maintain the gross profit margin level in 2020 and the revenue growth rate remains at a low level.
6) Other sectors showed a downward trend in overall growth rate after the weakening of demand related to the new crown. We expect the growth rate to be comparable to the industry's growth rate and the gross profit margin remains stable.
expense side We expect the company to maintain a stable expense rate, with the sales expense rate stable at 5% in 2022-2024 and the management expenses remain at 10%. Due to the need for product R&D investment, R&D expenses are expected to gradually increase, at 7%, 8.5% and 9.5% respectively.
.2 Valuation Analysis
We chose domestic companies with pharmaceutical equipment and consumables that are similar to Dongfulong's business, which mainly operates in pharmaceutical equipment and consumables, for valuation comparison. The average valuation of comparable companies in 2022-2023 is 19 and 15 times PE, respectively. Dongfulong's PE valuation level is lower than the industry comparable average.
.3 Report summary
As the leader in domestic pharmaceutical equipment, the company is committed to becoming an international first-class supplier in the field of drug manufacturing science. It is expected that orders will continue to grow in the fields of biopharmaceuticals and CGT. We expect that under the upward trend of the biopharmaceuticals and CGT sectors, the company's bioengineering and consumables fields will maintain rapid growth. In 2022-2024, the revenue will be 5.44 billion yuan, 6.74 billion yuan, and the net profit attributable to shareholders will be 99 billion yuan, 1.27 billion yuan, respectively, an increase of 20.1%, 28% and 24% year-on-year, respectively, with a corresponding PE of 13, 10 and 8 times respectively.
5 Risk warning
1) Domestic substitution and overseas business expansion are not as expected. The decline in capital expenditure of downstream pharmaceutical companies may lead to a decrease in upstream pharmaceutical equipment procurement volume, affecting the progress of domestic substitution and overseas business expansion.
2) The number and progress of domestic new drug research and development are lower than expected. The research and development progress of domestic innovative drugs, CGT and other clinical projects may be lower than expected and affect the increase in the volume of Dongfulong Bioengineering-related equipment and consumables.
3) The private placement is less than the expected risk. The company's planned amount of funds to be raised by the company's private placement project is large, and the progress may be lower than expected.
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selected report comes from [Fuanzhan Think Tank]
